:: Fourth Circuit Hears Argument Over ERISA Preemption Of Maryland “Fair Share” Legislation
For about 40 minutes in a wood-paneled courtroom overlooking the state capitol, the panel of three judges from the Court of Appeals for the 4th Circuit led by Judge Paul V. Niemeyer considered the appeal of that ruling. They needled with constant questioning an assistant Maryland attorney general defending the state and a lawyer for the Retailers Industry Leaders Association, a trade group including Wal-Mart that challenged the Maryland law.
Baltimore Sun (November 30, 2006)
Under The Fair Share Health-Care Fund Act, Md. Code Ann., Lab. & Empl. § 8.5-101, et seq. (“Fair Share Actâ€), non-governmental employers of 10,000 or more people that “[do] not spend up to 8% of the total wages paid to employees in the state on health insurance costs, shall pay to the Secretary an amount equal to the difference between what the employer spends for health insurance costs, and an amount equal to 8% of the total wages paid to employees in the State.â€
The Maryland legislature passed the legislation in January in an override of Republican Gov. Robert Ehrlich’s veto, but the law was struck down as preempted by ERISA in Retail Leader Associate v. Fielder, (D. Md. 2006) (The Retail Industry Leaders Association is a trade group that represents Wal-Mart.)
According to a Wall Street Journal report, State Solicitor General Steven Sullivan told the appeals court that the law is part of the state’s “ongoing, long-standing efforts to address health care and skyrocketing costs of Medicaid.”
The Sun reports that Niemeyer, joined on the panel by Judges M. Blane Michael and William B. Traxler Jr., spent most of his questioning badgering Sullivan on the issue of whether federal law should trump the contested state law. The following colloquy is of interest:
At one point, Niemeyer asked hypothetically whether the state could pass a law requiring all employers to provide health care benefits for their employees and still not violate federal law. Sullivan answered yes, drawing skepticism from Niemeyer. “I don’t think you help yourself to make that argument,” the judge said.
The “Fair Share” legislation is a part of a growing trend of State activism in forcing employers to pick up the expense of medical care for the uninsured. Recent efforts in this direction were noted in a previous article on this site. The Fourth Circuit decision will be closely watched as a bellweather for whether such efforts have any spark of life outside of the broad blanket of ERISA preemption.
According to the Richmond Times-Dispatch (AP Wire), Sullivan argued that the legislation is not preempted “because it doesn’t force Wal-Mart to offer health care; it gives companies the choice of spending at least 8 percent on employee health benefits or covering the costs with increased taxes.”
The Times-Dispatch reports that Sullivan argued “They have real options; Wal-Mart knows it . . . They were trying to convince the legislature they weren’t as chintzy as their competitors were saying they were.”
RILA attorney William J. Kilberg argued that ERISA does not permit States to compel companies’ health-care spending. Since companies can opt to pay the tax, Niemeyer asked if the legislation was actually mandating benefits. In reply Kilberg stated: “It’s a Hobson’s choice, because no sane employer would make that choice” between increasing its spending and paying more taxes, Kilberg said.
Kilberg characterized the legislation as “an unprecedented, direct assault on ERISA” and, if upheld, the end of a uniform national plan as envisioned by ERISA.
Additional information is available on the RILA website.
